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Essay in Barron's protests Fed's shredding its minutes

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  • cxpowell
    8:45p ET Sunday, December 16, 2001 Dear Friend of GATA and Gold: Last week Barron s published an essay by Robert D. Auerbach, a professor at the University of
    Message 1 of 1 , Dec 16, 2001
      8:45p ET Sunday, December 16, 2001

      Dear Friend of GATA and Gold:

      Last week Barron's published an essay by Robert D.
      Auerbach, a professor at the University of Texas,
      complaining about the Federal Reserve's active
      concealment of the public policies it carries out.
      Interestingly, one of the Fed meetings cited by
      Auerbach is the one in whose minutes GATA's
      investigators discovered what we consider to be the
      smoking-gun reference to "gold swaps" undertaken by
      the U.S. Treasury Department, the Federal Open
      Market Committee meeting of January 31, 1995.

      The Fed clearly has a lot to hide, about gold and
      other things.

      We ask that our supporters in the United States share
      this essay with their representatives in Congress as a
      way of reiterating their request that the Fed and the
      Treasury Department be compelled to do their business
      fully in public and come clean about gold.

      CHRIS POWELL, Secretary/Treasurer
      Gold Anti-Trust Action Committee Inc.

      * * *

      That Shreddin' Fed

      Just 18 minutes of Watergate tapes were erased, while
      the Fed's "edits" veil years of historic record

      By Robert D. Auerbach
      December 2001

      Richard Nixon regretted not having burned the infamous
      Watergate tapes. Federal Reserve Chairman Alan
      Greenspan, who, shortly after Nixon's resignation, came
      to Washington to be Gerald Ford's chairman of the
      Council of Economic Advisers, evidently intends not to
      make the same mistake.

      When the Federal Open Market Committee gets together
      Tuesday, certain portions of the meeting may not be
      recorded. Moreover, unedited transcripts of what is
      taped will be disposed of, leaving only records edited
      by Fed staffers for the public to read, and then only
      after a wait of five years.

      That could leave a serious gap in the historical record
      of the Fed's response to the national emergency after
      the terrorist attacks of September 11, when U.S.
      monetary authorities provided unprecedented liquidity
      to prevent a meltdown of the global financial system.

      In another instance when the central bank, under
      Greenspan, deftly defused a crisis -- the October 1987
      stock-market crash -- the records of Fed officials'
      crucial telephone conference calls are conspicuously

      Since early 1995, some discussions among the 12 FOMC
      members, the Fed's policy-setting panel, have been
      declared "off the tape." Supposedly, these unrecorded
      talks don't relate to devising monetary policy. But at
      the two-day meeting of January 31-February 1, 1995, the
      FOMC voted to pull the plug on recording its meetings
      if the discussion fell under the undefined rubric
      "organizational." And Greenspan stated: "I am not going
      to record these votes because ... there is no legal
      requirement." The vote was taken without recording
      members' names.

      Ironically, that vote came after Greenspan noted prior
      FOMC reluctance to have its discussions recorded
      "mainly on the grounds that we thought the taping
      inhibited the deliberative process." But he added "...
      with perhaps a qualification [a subpoena for early
      release of the transcript] ... there is very little
      evidence that the quality of our discussions has been

      Prior to the vote, a report from an FOMC subcommittee
      suggested a policy of "off-the-tape discussion that is
      not about monetary policy." But Lawrence Lindsey, then
      a Fed governor and now a Bush economic adviser, warned
      that "one might think of it as a witch hunt in which we
      are turning over to the prosecutors evidence that is
      really none of their business. It is possible for us to
      prevent taping under those circumstances by turning off
      the tape now."

      The Fed chairman was determined to turn off the
      recorder for "organizational discussions" after what he
      called "a frankly outrageous request for the tape of
      our discussion in October a year ago," according to the
      January 31-February 1, 1995, meeting transcript. Once
      the motion passed, FOMC members also were told to move
      some discussions to lunchtime, when "the tape is not

      The "outrageous request" Greenspan referred to came
      from former House Banking Committee Chairman Henry
      Gonzalez, who insisted that congressional staff members
      hear a recording of an October 15, 1993, FOMC
      conference call. In that tape, most of the presidents
      of Fed district banks and board governors agreed not to
      mention the previously unknown existence of the FOMC
      transcripts when they testified before the Banking
      Committee about FOMC written records. Greenspan, who
      was to cover this subject for the banking panel, didn't
      mention the 17 years of transcripts at the hearing.

      Gonzalez later accused the witnesses of misleading

      A week after the hearing, Greenspan ended the Fed's 17-
      year secret by informing the Banking Committee that
      "unedited transcripts exist for each regular meeting of
      FOMC held after the meeting of March 15-16, 1976," in a
      letter to Gonzalez. Thirty-eight of the transcripts (or
      tapes) for 104 FOMC conference calls were reported
      missing, however.

      The FOMC also has shredded its unedited transcripts for
      1994, 1995, and 1996.

      FOMC members were told in 1995 that, even though they
      were "not permitted" to discard "raw transcripts" of
      meetings before 1994, future unedited transcripts would
      be "thrown out" and only transcripts edited by the Fed
      would be retained.

      The Fed hasn't yet shredded the unedited transcripts of
      FOMC meetings since 1996. But there are no plans to
      change the central bank's policies of turning off tape
      recorders or shredding unedited transcripts, according
      to Donald Kohn, adviser to the board for monetary

      FOMC meeting transcripts -- with redactions for
      national security, personnel matters, and some foreign
      central-bank matters -- were published in paraphrased
      form during 1965-1976, and verbatim from 1993 to
      currently, with approximately a five-year delay. The
      unedited transcripts are sent to the National Archives
      and Records Administration, where they are edited by
      archivists and published after a 30-year delay.

      The late Arthur Burns, the Fed chairman in 1970-78,
      left his term's FOMC transcripts at the Ford Library in
      Ann Arbor, Mich. After being lightly edited by the
      archivists, they are now available for public viewing.
      Yet the Fed has not yet released these same transcripts
      for the last years of Burns' term.

      The Fed has applied a heavy hand to redacting. The
      records of periods of crisis are conspicuously sparse.

      For instance, there are abundant redactions in the 1995
      transcripts when the FOMC members voted to lend money
      to Mexico because the U.S. Treasury had insufficient
      funds and the Congress would not approve this foreign

      And, as noted, tapes and transcripts of the panel's
      conference calls of October 21, 22, 23, 26, 27, 28, 29,
      and 30 of 1987 are missing. Conspiracy theorists at the
      time believed that stock-index futures were bought by
      the Fed's trading desk, or by brokerage firms at the
      central bank's behest, to pull the equity market out of
      its nosedive. With the peculiar absence of the records,
      these stories take on the quality of accounts of UFO
      landings in Roswell, New Mexico, which supposedly were
      covered up by the government.

      In truth, our present national emergency dwarfs that of
      the post-October 19, 1987, period. The Fed avoided a
      meltdown following the September 11 attacks by taking
      extraordinary and decisive actions. On September 13
      alone it lent $45 billion through its discount window.
      It used open-market operations to massively increase
      liquidity: by $38 billion on September 12, $70 billion
      on September 13, and $81 billion on September 14.

      The Fed also implemented $90 billion in swaps with
      central banks, and granted billions of dollars of
      credit to banks on its outmoded interdistrict paper
      check-clearing system because its contracted 53-
      airplane fleet was grounded. (Slower surface transport
      was substituted until all air travel resumed a week
      after the attack.)

      That said, there should be an FOMC transcript of
      deliberations after September 11, clearly showing each
      FOMC member's part in distributing these billions of
      dollars as well as any funds lent to brokerages and
      other businesses post-September 11 under the Fed's
      emergency powers (Section 13-3 of the Federal Reserve
      Act) with a vote of five members of the Board of

      That presumes that these crucial discussions were
      indeed recorded. According to one Fed official, he is
      aware of only one instance in which talks were off-
      tape. "No recorder [was] functioning" for part of the
      May 23, 1995, FOMC meeting. The minutes of this meeting
      state that a portion "was not recorded in keeping with
      the decision made at the meeting on January 31-February
      1, 1995, normally not to record discussions unrelated
      to monetary policy."

      The 1995 transcripts published this year, however, show
      FOMC members granted themselves authority to pull the
      plug without agreeing on the meaning of "unrelated to
      monetary policy."

      Does that mean discussion that relates narrowly to the
      rate at which the overnight federal funds rate is
      pegged, or more broadly, the policies undertaken to
      quell crises?

      The Fed's present policies of shredding unedited
      transcripts of its FOMC meetings or allowing
      deliberations to occur "off the tape" leave these and
      other questions unanswered. Most importantly, they are
      inconsistent with making each FOMC member accountable
      in managing the billions of dollars involved in the
      nation's domestic and international monetary policies.


      Robert D. Auerbach is a professor at the Lyndon B.
      Johnson School of Public Affairs at the University of
      Texas at Austin, and was an economist for the House
      Banking Committee for 11 years.

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